The rehabilitation hospital industry is quickly mobilizing to stave off a new Medicare payment system that it fears will destroy its financial health.
The hospitals worry that HCFA is moving to implement a prospective payment system based on the system used to pay skilled-nursing facilities. The system places nursing home patients into resource utilization groups, or RUGs, based on how well their patients perform daily activities and the number and types of services they use. The more complex the case, the higher the reimbursement.
Since their PPS went into effect in July 1998, skilled-nursing facilities have complained that their reimbursement does not cover the cost of care. Rehabilitation hospitals say the same thing will likely happen to them if HCFA uses the same kind of payment system.
About 1,100 rehabilitation facilities are Medicare-certified.
"The effect would be to make rehab hospitals like nursing homes," said Thomas Scully, president and chief executive officer of the Federation of American Health Systems, which represents for-profit hospitals. "The (skilled-nursing payment system) totally gutted nursing homes in the last year," Scully said. "Rehab hospitals as we know them would be wiped out in five or six years."
Hospitals are not the only ones concerned. Gail Wilensky, chairwoman of the Medicare Payment Advisory Commission, agrees that rehabilitation hospitals should be paid like their acute-care counterparts, not like nursing homes.
MedPAC's latest report to Congress, released March 1, said HCFA is leaning toward a skilled-nursing-like system for rehabilitation hospitals because it would make payment policies more consistent across post-acute-care settings.
However, the MedPAC report argued that it is natural for rehabilitation hospital payments to resemble payments at acute-care facilities because more than 60% of rehabilitation hospitals are units of acute-care facilities.
Under the current payment system, Medicare reimburses rehabilitation facilities based on their costs. In 1996, Medicare paid $4.3 billion to rehabilitation hospitals.
The American Hospital Association told the House Ways and Means health subcommittee that it agrees with MedPAC's recommendations on rehabilitation payments.
RUGs "were designed for nursing home patient populations, not rehabilitation hospital populations," the AHA said in written testimony to the committee.
"Rehabilitation PPS payment should be based on a patient's ability to function independently, measurements that are much better tied to the mission of medical rehabilitation than resource utilization groupings," the AHA wrote.
A HCFA spokesman said the agency hasn't made a policy decision about how to pay rehabilitation hospitals. HCFA must implement a payment system for rehabilitation hospitals by October 2000, according to the budget law passed by Congress in 1997.